Thursday, Oct 19, 2017
Energy | Sustainability | Africa | Middle East | Egypt

US$5 billion landmark deal puts renewable energy potential in the spotlight


2 years ago

Egyptian President Abdel Fattah El-Sisi and President and CEO of SkyPower Kerry Adler share a congratulatory moment on SkyPower-IGD’s US$5 billion commitment to build 3,000MW of solar energy projects in Egypt over the next four years
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Foreign investors signed an unprecedented level of agreements at the Egypt Economic Development Conference, particularly in the burgeoning renewable energy sector. Solar’s potential shone through with a multibillion-dollar pact between SkyPower-IGD and the Egyptian government to add 3 gigawatts over the next four years.

Culturally and historically, Egyptians have long had a close affinity with the power of the elements, particularly the sun.

Ancient Egyptians worshipped their sun god Ra to such an extent that some historians theorize they revered him above all others, and that the pyramids may have been built to represent rays of sunlight to further connect the pharaohs with the deity, who was also closely linked with the wind gods Shu and Amun.

Modern-day Egyptians are also showing increasing reverence for the elements, although not on such a spiritual level, but a more practical one: harnessing the power of the sun and wind to generate much-needed electricity is undergoing unprecedented levels of interest as local and foreign investors flock to gain a foothold in the republic’s burgeoning renewable energy sector.

Clean energy is set to add a silver lining to the dark cloud hanging over Egypt’s power generation challenges. Its oil and gas reserves – which currently generate 95% of the country’s electricity needs – are set for sharp depletion over the next few decades.

At the same time, higher economic growth, improved living standards and a rapidly urbanizing population mean that the demand for power is estimated to escalate by up to 6.2% a year until 2035.

With the Arab nation historically suffering from frequent electric blackouts that negatively impact domestic life and massive industrial development, the need to develop alternative energy sources is becoming ever more urgent.

Fortunately, the republic’s predicament of growing energy needs and fossil fuels petering out fits hand in glove with its abundant potential for renewable sources and the current global trend toward greener options, solar energy in particular.

Therefore, owing to plentiful year-round sunshine and high wind speeds – particularly on the Gulf of Suez – Egypt has clearly recognized and begun to promote the substantial opportunities renewable energy can have on this rapidly developing country.

Exhibiting the key drivers of a rapidly growing power demand, exceptional availability of wind and solar resources and the necessity to reduce fossil fuel consumption, Egypt has all the hallmarks of becoming a considerable renewable energy market in the short term.

“Our main problem was our dependence on natural gas,” explains Dr. Mohamed Shaker, the Minister of Electricity and Renewable Energy, “but we have decided to adjust the energy mix to include renewables, whether it be wind or solar.”

Indeed, green energy has become an increasing priority for the Egyptian government. Previous administrations had pursued a number of energy diversification reforms, with limited success as a result of political and economic events that came to a head in 2014.

Over the last 12 months the country has begun to make clear headway in pursuing renewable energy under the government of President Abdel Fattah El-Sisi.

When addressing the World Future Energy Summit in Abu Dhabi in January, the President highlighted and declared: “The availability of energy and managing the demand for it is one of the main priorities on the Egyptian development agenda.”

EEDC

Investors’ responses to the three-day Egypt Economic Development Conference (EEDC) held in March bear testament to the energy industry’s potential.

The hugely successful event saw more than 2,000 delegates from 120 countries descend on Sharm El Sheikh and enter into various forms of agreements worth around US$22 billion in the electricity and power sector.

President Abdel Fattah El-Sisi devoted much of his speech to discussing new deals for power generation, with some of the biggest investments announced at the conference being poured into the renewable sector.

Industry frontrunners expressed their optimism for the outlook of clean energy generation in Egypt, applauding the country’s dynamism and investment environment.

The President and Chief Executive Officer of leading solar multinational SkyPower Global, Kerry Adler, commended Egypt’s leaders for “swiftly executing its well designed strategic blueprint to ensure a bright and prosperous future for all Egyptians, for generations to come.”

Such sentiments were echoed by other high-ranking attendees. Jeffrey Immelt, Chairman and CEO of GE, remarked: “Today, countries that succeed are those that can get in front of the trends, innovate, work together and deliver results.

Egypt is moving with speed and scale, and reimagining a future centered on its people.”

During his keynote speech at the EEDC, President and CEO of Germany’s Siemens, Joe Kaeser, commented: “Egypt needs a powerful and reliable energy system to support its long-term, sustainable economic development, and experienced partners who understand the specific challenges facing the country. Siemens’ technology and expertise has been supporting Egypt’s growth for more than 150 years. We are part of Egypt’s society and proud to shape Egypt’s future together.”

Attracted to the country’s wind potential, Siemens reached agreements with the Egyptian government to build a 4.4 gigawatt combined-cycle power plant and install wind power capacity of 2 gigawatts.

Under the deals, the company will propose to build additional combined cycle power plants with a capacity of up to 6.6 gigawatts and 10 substations for reliable power supply.

In addition to wind, the EEDC was particularly auspicious for the solar industry, with a number of agreements signed with Egypt’s New and Renewable Energy Authority (NREA) for solar projects by the likes of Saudi Arabia’s FAS Energy, among others.

However, there was one announcement in particular that grabbed the spotlight and both the industry’s and media’s attentions.

A landmark agreement

SkyPower Global made headlines at the EEDC when it set an unprecedented milestone in Egypt’s renewable energy ambitions.

In partnership with Middle Eastern infrastructure specialists International Gulf Development (IGD), SkyPower-IGD signed a historic agreement with the Egyptian government to develop 3 gigawatts of utility-scale photovoltaic (PV) projects that will be built over the next four years.

The joint venture between SkyPower Global and IGD will enable the production of clean, sustainable and cost-effective energy that will help fuel the nation’s socioeconomic ambitions.

The project represents a massive US$5 billion investment and will create employment for thousands of people, totaling an estimated 74,500 job years.

It also includes 600 megawatts of solar panel fabrication and assembly facilities to be built in Egypt.

Working closely with the Ministry of Electricity and Renewable Energy, SkyPower-IGD plans to start the construction of solar power projects by late 2015.

The government is also looking to install 2.3 gigawatts of solar by 2017 through its feed-in tariff program.

“Egypt has the right vision,” says Mr. Adler at SkyPower Global. “The country needs power.

Oil or gas is the current source for Egypt’s primary energy demands. If solar and wind power can be harnessed during the day, oil and gas can be saved for evening hours.

This can be controlled, which is the rationale for Egypt moving toward solar power as a significant part of its future energy-supply mix.

Egypt’s targets for growth, such as the New Capital City, require a tremendous source of energy, which is all the more reason why they need to continue on their path toward rapidly streamlining their process to move from contract to commercial operation.”

Also present at the signing of the agreement was Canada’s Ambassador to Egypt, Troy Lulashnyk, who commented that the agreement “marks a significant milestone” for international businesses looking at the region, sending a “clear signal…that they can work in Egypt with confidence, and to Egyptians that their country is open for business.”

Electricity and Renewable Energy Minister Dr. Shaker expressed the government’s enthusiasm for the solar projects announced at the EEDC and the massive investment they attract.

“Foreign investment in Egypt helps build the economy and strengthen international ties with well-respected and viable partners, such as SkyPower Global and IGD,” he remarked.

Partnerships with credentials

SkyPower Global is one of the largest and most successful developers and owners of solar energy projects in the world.

Over the past few years, SkyPower Global has secured more than two dozen utility-scale solar PV power purchase agreements and contracts with leading utilities and governments around the world, estimated to be worth in excess of US$80 billion in long-term renewable energy sales.

Its roots stretch back over a decade and it now has more than 30 international offices. The company develops, finances, owns and operates solar energy projects from the initial stages through commercial operation in more than 60 countries.

In fact, it currently has some 25 gigawatts of projects at various stages of development worldwide. 

Fellow partner IGD brings its expertise in regionally based power, renewable energy, infrastructure, construction, and oil and gas projects throughout the MENA region to the landmark project.

The company is a founding partnership between Al Hamed Enterprises and Gulf Data International (GDI), and its joint venture track record demonstrates its ability to commit, mobilize and successfully deliver turnkey projects.

Over the past 25 years, IGD’s partner companies have successfully executed various projects both locally and internationally, and the company invests in state-of-the-art technology and solutions to ensure it is ready for projects such as its venture with SkyPower Global and the Egyptian government.

Solar on the global rise

On an international scale, the solar industry is going through rapid expansion and its potential outlook is nothing short of remarkable.

“We are in a new era of renewable energy,” asserts Mr. Adler. “Solar energy is the new way and people need to get used to it – and fast.”

In 2014 a record amount of solar-sourced power – at least 40 gigawatts, up from 37 gigawatts in 2013 – was added to the planet’s energy grids, taking the world’s total cumulative solar capacity to 178 gigawatts, or 100 times higher than in 2000.

For the first time ever, more energy was produced from renewable sources than nuclear in Europe last year, with solar playing a major part.

The U.K. and Germany led the charge adding around 7 gigawatts to Europe’s solar capacity, by installing 2.4 gigawatts and 1.9 gigawatts respectively, followed by France with an increase of about 0.9 gigawatts.

An uptick in PV installations is happening all around the world, not just in Europe. The geographical spread of solar projects is expanding and installations are no longer regarded as a Europe-centric fad. Internationally, China, Japan and the U.S. are leading the current growth in the industry, adding 10.6 gigawatts, 9.7 gigawatts, and 6.5 gigawatts, respectively, of installed capacity in 2014.

Korea’s market doubled to more than 0.9 gigawatts, South Africa installed 0.8 gigawatts, and Canada, Taiwan, Thailand, The Netherlands and Chile each raised their capacities by around 0.5 gigawatts.

The trend looks set to continue, with regular announcements of major solar projects emerging around the globe.

Pakistan’s government recently confirmed plans for one of the world’s largest solar power projects – a 900 megawatt, US$1.5 billion contract in Quaid-e-Azam Solar Power Park in Bahawalpur.

Coincidentally, SkyPower Global has also been in Pakistan for more than a year.

Such significant advances have renewable energy associations and analysts stating the solar power industry has reached a tipping point that will open the way to a new wave of investment.

SolarPower Europe, formerly the European Photovoltaic Industry Association (EPIA), estimates global cumulative solar capacity will continue its rapid growth and could reach between 396 gigawatts and 540 gigawatts by 2020.

In SolarPower Europe’s recent Global Market Outlook for Solar Power 2015-2019 report, its President Oliver Schafer and CEO James Watson express their belief that last year’s expansion “demonstrates the fact that the power of solar is unstoppable; the developments in the sector that have supported solar to become a more predictable and cost competitive energy source in recent years underpin our growth.”

Furthermore, two reports issued by the International Energy Agency (IEA) in 2014 suggest that by 2050 the sun could be the planet’s largest source of electricity, ahead of fossil fuels, wind, hydro and nuclear sources.

Discussing more imminent options during his keynote speech at the EEDC, Siemens’ Mr. Kaeser commented: “I wish we had as many opportunities in Europe as we have in Egypt. I am impressed with the leadership I see in this country.”

Why Egypt?

Foreign interest in Egypt’s potential for solar power goes back further than you might think. In 1912-1913, American inventor, engineer and pioneer in solar energy development Frank Shuman built the first solar thermal power station in the world in Maadi.

His innovative plant featured various technological advances, using parabolic troughs to power a 60-70 horsepower engine in Maadi that pumped 6,000 gallons of water per minute from the Nile River to neighboring cotton fields.  

Just over a century later, Egypt’s appeal to the international solar community was clearly demonstrated in March when SkyPower became the first international company to approach the Egyptian government with a solar project of such magnitude.

“The signing of this monumental agreement demonstrates the shared passionate aspirations of global partnerships that will substantially impact the country’s GDP, contributing approximately US$16.1 billion and resulting in increased opportunities for employment, skills training, youth and education,” says Mr. Adler.

With fervor for solar energy on the rise worldwide, and SkyPower Global’s already established international presence, what in particular about Egypt spurred the company to invest so heavily in such a benchmark project in the republic?

“We look at Egypt as being a pivotal leader in the Middle East,” explains Mr. Adler. “The criteria for SkyPower Global to select a country where we want to invest and build power are: a growing economy, the need for new power versus the need for replacement power, a highly educated and talented workforce, and most importantly a government that is fully committed to delivering renewable solar power and jobs, coupled with education for its youth. Egypt met every single criterion.

“We are buoyed by the commitment from the countries in the Middle East and Europe. SkyPower-IGD is also pleased by the commitment of the government of Egypt to make investors feel welcome and provide adequate protections to them in the form of modifications to the investment laws, in addition to other steps they have taken to open the doors to foreign investment.”

The effect of such a positive approach to international involvement is reflected in the swarms of foreign investors entering the sector, as SkyPower-IGD is joined by numerous international players coming to Egypt, striking partnerships with local enterprises.

The Egypt Solar Industry Association (Egypt-SIA) has listed various large-scale projects in progress in its recently published report, Egypt’s Solar Energy Market: FiT Program and Beyond 2015. In addition to the SkyPower-IGD venture, it includes projects by major groups from Jordan, the UAE, and Saudi Arabia.

Feed-in tariff (FiT) program

Worldwide, the rising interest in solar power has been encouraged by countries establishing feed-in tariffs, self-consumption measures, tax breaks, and beneficial net-metering policies.

Fine-tuned technology and decreasing costs of PV cells have also made the prospect of solar electricity becoming a competitive mainstream alternative more viable.

In Egypt, a milestone feed-in tariff (FiT) program announced by Egypt’s government in September 2014 to encourage private investment in renewables has become the cornerstone of the clean energy push.

Under the FiT, private companies will receive a fixed tariff for the power they produce from renewable resources.

The size of the payment depends on factors such as the type of technology used and the size of the project.

The first FiT tender – in which the NREA earmarked opportunities for 4.3 gigawatts worth of wind and solar projects – attracted massive interest from both international and local players.

“We received 178 project proposals for the FiT scheme,” comments the renewable energy minister, Dr. Shaker.

“We were asking for only 2.3 gigawatts for solar and we saw 10 gigawatts of proposals. We also asked for 2 gigawatts for wind power and we received double that amount in applications.”

Of the 178 proposals, the NREA has given 69 projects the go ahead, which will contribute greatly to the government’s goal of producing a total of 13 gigawatts of generation capacity to meet the soaring power demands over the next five years.

All this extra electricity coming online will no doubt pose a challenge for the existing transmission network, but as the renewable energy minister points out, “The government is financing EGP 2 billion (US$260 million) in order to enhance the network to accommodate all of the additional power.”

New electricity law

Such agreements at the EECD were largely made possible by a raft of reforms passed in the run-up to the conference, key among them a draft law passed by the Cabinet in February that paves the way for privatization of the energy sector.

The new law aims to move the state toward a regulatory role, and away from directly managing the electricity sector.

According to a cabinet statement, it calls for the creation of an independent entity to “ensure the preservation of the interests of consumers and providers of the service and a balanced relationship between them.”

The law will also introduce rules to permit “free competition” in the production, transfer, distribution and sale of electricity, and will separate the transport, production and distribution of electricity.

In short, the changes to the law will allow private companies to transmit and sell electricity directly to consumers, leaving the state owned Egyptian Electric Holding Company out of the process.

This new model will offer the private sector a greater scope of activity in the energy generating sector, as well as open up new platforms for funding and growth.

And if the deals announced at the EEDC are anything to go by, liberalization of the power sector shows great promise as a way to get more electricity online in Egypt.

More than just energy

The EEDC attracted billions of dollars in investment, not only in PV power plants, but also in manufacturing facilities, research and development, and training.

A focus on social development as well as clean energy generation has made some projects stand out. For example, SkyPower Global has pledged to roll out programs for professional development, skills training and academic/vocational certification for young people.

Its EduGreen Program will provide certification, education, and scholarships for Egypt’s youth centered on renewable energy.

The plan is for EduGreen to be delivered in tandem with a globally recognized university as a sister institution to an Egyptian university, and encourage international collaboration. The company will be subsidizing the project.

“We have also committed to building a solar lab in Egypt for the research and development of advanced solar technologies to improve the efficiency of solar and try to find innovative new technologies that would advance renewable energy,” adds Mr. Adler.

“This is what sets SkyPower apart globally. We are not only about building and selling power. Indeed this is the core of our business, but we are also firm believers in ensuring that we are strong participants and contributors in the community. We are focused on creating jobs in addition to helping build economies and delivering clean solar energy.”

Fast action

With Egypt taking “fast action for the first time in the history of Egypt’s electricity sector,” according to Dr. Shaker, the Minister of Electricity and Renewable Energy, the nation clearly means business.

It has already introduced at least 3.6 gigawatts of power in 2015 so far – a process that would normally take three to four years.

If power continues to be added to the grid at such a rate, with renewable energy at the core of this process, Egypt can wave goodbye to the energy shortages that have plagued the country’s progress and finally welcome true socio-economic development, the likes of which it has never seen before.

“I have a lot of respect for, and am truly impressed by, the country’s vision and leadership,” says Mr. Adler.

“I have every confidence Egypt will become a solar energy giant in the region.”

With a stabilizing political and economic landscape, coupled with international investment, Egypt is sure to become one of the world’s top renewable players in the near future.



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